The ability of municipalities to provide the required level of infrastructure and service delivery directly impacts the performance of the property sector, says Harcourts South Africa.
In a response to an “Independent Media Property enquiry”, the estate agency’s CEO Richard Gray, said if municipalities continue to fail in this respect, it will directly impact the value of properties, affordability and the availability of housing a few years down the line.
“Macroeconomic pressures that directly impact the real estate sector include, among others, the rising cost of living, crumbling infrastructure in many areas across the country and the persistent high interest rates.
“Although the interest rate is on a very welcome downward cycle, it remains a challenge for affordability, particularly in the first-time homebuyer market,” Gray said.
He added that South Africa’s residential market is very sensitive to interest rates, economic growth and the state of local municipalities.
FNB Commercial Property Finance senior economist John Loos, recently told “Independent Media Property” that the high property operating cost inflation remains a pressing issue, with property owners and tenants in many municipalities facing tariff and rate increases significantly above general inflation, often coupled with poor service delivery.
“Although electricity supply has improved over the past year, above-inflation increases in electricity tariffs are expected to persist. Municipalities are likely to implement further hikes in rates and other tariffs, exacerbating operating cost pressures,” Loos said.
He added that persistent challenges with poorly performing municipalities, sharp tariff increases, and inadequate service delivery pose significant risks to operating costs for property owners and tenants.
“Addressing these risks will require focused structural economic reforms, improved municipal performance, and ongoing investment in infrastructure and governance,” Loos said.
Harcourts said the SA property sector has begun this year with a good deal of cautious optimism and expectations for growth, even though it might only be mild growth.
It said markets across the country have shown strong signs of resilience in 2024 but they expect to face some headwinds in 2025, despite the downward interest rate cycle that started last year.
Further interest rate cuts are expected throughout 2025 which will support welcome growth in the real estate sector, following a challenging 2024, it said.
The estate agency said millions of people continued to migrate to metropolitan areas in Gauteng, the Western Cape and KwaZulu-Natal for better job opportunities and, with this, the demand for affordable housing is ever-increasing.
“We’re also seeing that the middle-to high-end-properties segments are stabilising after a period of price correction throughout 2024.
“Generally, we see that, in most areas, sellers are becoming more realistic with pricing their properties, leading to improved buyer confidence.”
According to Gray, there is no doubt that there is a definite increase in consumers’ positive sentiment in January 2025 towards the economy, the general state of affairs in the country and real estate as an investment category.
“There are real and definite challenges and big concerns though, of which low economic growth and job creation are standouts, but I believe that the stability and confidence that has come with a stable electricity supply, a change in the leadership guard in the form of the GNU, inflation that is under control, lower projected interest rates in 2025 and other stabilising factors, we are entering the year in a much more favourable position than in the previous 2-3 years,” Gray said.
He said at present, they were seeing that the Western Cape has been driving the rise in residential values over the past three years but were optimistic that this performance will broaden to particularly KwaZulu-Natal, Gauteng and the Eastern Cape in 2025, as these provinces have experienced little to any capital growth in 2024.
“The property sector should benefit from the upward phase of the property cycle in 2025 but we expect it to be patchy, varying between market segments and locality,” he said.
However, the business said the ability of municipalities to provide the required level of infrastructure and services poses a risk to the property sector.
It said where municipalities fail in this respect, it directly impacts the value of properties, affordability and the availability of housing.
PROPERTY